The Temasek Business Group does not exist. It is a piece of fiction created by the KPPU in order to claim jurisdiction over the non-Indonesian reported parties.

1.2The Temasek Business Group, together with Telkomsel, constitute a single economic entity.

Doctrine of “Single Economic Entity” is not recognised under Indonesian law and should not have been applied in this case.

1.3The KPPU has alleged in support of its single economic entity argument the following:

a. SingTel Mobile has management representation in Telkomsel i.e. that SingTel Mobile is entitled to nominate two Directors and two Commissioners to the boards of Telkomsel.

The truth of the matter is that the KPPU has conveniently ignored the following important facts:

a. Telkom has the majority and it is entitled to nominate 3 out of 5 Directors and 4 out of 6 Commissioners, including the crucial positions of President Director, President Commissioner and Finance Director.

b. Telkom has the majority in the Capex Committee. It is Telkom that controls the Capex Committee. In fact, in an examination before the KPPU, Telkom’s President Director testified that “Telkomsel proceeds in accordance with Telkom’s directions and for strategic matters, Telkomsel has to follow”.

c. SingTel Mobile has access to Telkomsel’s confidential information.

c. All shareholders have access to confidential information. This is a right afforded by Indonesian company law.

d. With 35% shareholding, SingTel Mobile is in a position to veto fundamental corporate decisions, such as change in business and/or winding up.d. The requirement for 75% shareholder approval is a common practice and legal requirement to protect minority shareholders, including passive capital investors.

It is, therefore, Telkom which is in control of Telkomsel and not SingTel Mobile

If we applied the KPPU’s criteria of what constitutes a single economic entity, it would be Telkom and Telkomsel which would constitute a single economic entity.

1.4As business actors, SingTel and SingTel Mobile are within the jurisdiction of the KPPU.In fact, SingTel and SingTel Mobile are not business actors and the KPPU has no jurisdiction over SingTel or SingTel Mobile.

SingTel and SingTel Mobile are not business actors because they are not domiciled or established in Indonesia. Nor are they conducting business activities in Indonesia.

Indonesian legal experts have confirmed that according to Indonesian laws, owning shares is not “conducting business activities” in Indonesia. SingTel Mobile is not involved in the business operations and commercial transactions of Telkomsel.

There has been no breach of Article 27(a).SingTel does not own any shares in Telkomsel. SingTel Mobile owns only 35% of Telkomsel. Therefore, SingTel and SingTel Mobile are not majority shareholders in Telkomsel.

Telkom owns 65% of Telkomsel. It is Telkom and not SingTel Mobile that owns the majority of shares in Telkomsel.

2.2“Majority shares” can be interpreted to include minority shareholdings where the minority shareholder is in control.

The meaning of “majority shares” is clear and its plain meaning must be applied.

Leading experts agree that Article 27(a) has to be interpreted plainly i.e. majority shares must mean ownership of majority shares and cannot be expanded to mean control.

3Temasek’s cross-ownership of Telkomsel and Indosat has resulted in anti-competitive behavior by:

The KPPU has produced no credible evidence to support its contentions and/or to link these contentions to Temasek’s alleged cross-ownership.

Leading experts have shown that Indosat invests heavily in network development and is more efficient in terms of the ratio of subscribers to base stations.

ii. restricting access to interconnection facilities; andLeading experts have shown that access to interconnection facilities is reasonable and available to newcomers. New carriers have entered the market. Market concentration is below average of comparable countries and falling.

iii. maintaining high tariffs.Leading experts have shown that the prevalent tariffs in Indonesia are reasonable compared with those in comparable countries:

a. World Bank data: Indonesian prices are “well below average” for lower-middle income countries; below average for East Asia Pacific.

d. Same data show Indonesian prices falling rapidly over time as competition develops. From 2003-2006, Telkomsel Average Revenue per Minute fell in real terms (including inflation) at an annual rate of 13.4%.

The tariffs charged by Telkomsel are within the limits set by the Indonesian telecommunication regulators. The KPPU does not have the jurisdiction to supervise matters of tariffs.

The KPPU has misapplied several economic tests and ignored the findings of leading economic and business experts.

4The alleged cross ownership has caused consumer loss in Indonesia.

According to leading economic experts, the Indonesian cellular market is healthy and competitive.

The reductions in prices and growth in demand - caused by competition – have increased consumer welfare by Rp. 17 trillion between 2002 and 2006. Experts have concluded that there is in fact a consumer surplus, i.e. good value for money for quality cellular services.

There is no evidence to support the KPPU’s allegation that there is loss to consumer welfare. The KPPU’s analysis of the economic data is flawed:

a. The KPPU analysis is based on the incorrect assumption that Indonesian prices are too high.

c. Competition has caused prices to decline and they will continue to decline.

d. Competitors are free to provide different levels of price and non-price offers.

e. Increased choice and lower prices have resulted in greater consumer surplus. Consumers get a range of choices and they are able to make informed decisions - taking into account price and non-price propositions - about the operators.

5KPPU has complied with and respected the rights to the due process of law.KPPU has failed to accord fundamental due process rights to SingTel and SingTel Mobile in that it has amongst other things:

- failed to notify SingTel and SingTel Mobile of the content of the charges against them;

- failed to give sufficient time to prepare their defence and rebuttal; and

- failed to bring to the attention of SingTel and SingTel Mobile, the evidence which was later relied upon to arrive at a decision adverse to SingTel and SingTel Mobile.

6KPPU has, amongst other sanctions, ordered a divestment of shares in either Telkomsel or Indosat.KPPU has no authority, under Indonesian law to impose such an order for divestment.

When SingTel Mobile acquired its shares in Telkomsel in 2001, it sought and obtained all the necessary regulatory approvals from the relevant Indonesian authorities.

Likewise, when ST Telemedia invested in Indosat, the relevant Indonesian authorities reviewed the matter and gave their approval.

In fact, the Ministry of State Owned Enterprises had considered Article 27(a) and SingTel Mobile’s shareholding in Telkomsel before approving the acquisition of the Indosat shares. Further, the KPPU was involved in that process and had not raised any objections at that time.

B) References to Law No. 5 of 1999

Article 1 – Para 5:

Business actor shall be any individual or business entity, either incorporated or not incorporated as legal entity, established and domiciled in or conducting activities in the jurisdiction of the Republic of Indonesia, either individually or jointly based on agreement, conducting various business activities in the economic sector.

Article 27(a):

Business actor shall be prohibited to own majority shares in several companies of the same type which conduct business activities in the same field in the same relevant market, or establishing several companies with the same business activities in the same relevant market, if such ownership results in:

(a) one business actor or a group of business actors control more than 50% (fifty percent) of the market share of a certain type of goods or services

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About Me

As we know that economically and politically, State-Owned Enterprises (BUMN) has very strategic position in Indonesia. With hundreds trillions rupiah-valued assets, and extremely variable business fields then State-Owned Enterprises is one of the main drivers of Indonesian economy.State-Owned Enterprises are the most important asset of Indonesia